By almost any measure, fiscal 1995 was an
outstanding year for Xilinx. Revenues rose 38% from $256.4 million to $355.1 million.
Operating income increased 41% from $65.2 million to $92.0 million, and net income grew
44% from $41.3 million, or $1.71 per share, to $59.3 million, or $2.40 per share. Both
operating income and net income as percentages of revenues were the highest year end
ratios in the Company's history. In calendar 1994, Xilinx became the world's largest
supplier of programmable logic products, surpassing Advanced Micro Devices. In addition,
Xilinx is now the 10th largest vendor of Application Specific Integrated Circuits (ASIC)
in the world, as estimated by Dataquest, a market research firm that follows the
semiconductor industry.

As we have reported previously, the programmable logic market is
very price elastic. Recognizing this, we have developed three strategies to expand our
overall position in this market and in the larger mask programmed gate array market.

Our first strategy is to continue to reduce prices aggressively,
commensurate with our ability to lower manufacturing costs. In the first four months of
calendar 1994, Xilinx made two closely coupled price reductions that adversely affected
the June quarter results. As expected, these price reductions fueled higher unit volumes
and increased sales for the remainder of the fiscal year. XC4000 family revenues increased
nearly 80% year-over-year and accounted for 34% of fiscal 1995 sales. Together with XC3100 products, these device
families will continue to be the principal drivers of revenue growth in fiscal 1996.
Design-win activity, which historically has been the best indicator of future revenues,
was at an all-time high at year end for these proprietary products.

Our second strategy is to introduce innovative, new product
architectures that target new markets as well as high-volume, low-cost applications. In
late November, we introduced our newest architecture, the XC5000 family, which was developed
as a cost-effective, high-volume alternative to gate arrays. The CMOS gate array market
for devices under 20,000 gates represents a $1.2 billion market opportunity for Xilinx,
according to Dataquest. The XC5000
family sets new standards of cost effectiveness for high-density, programmable logic
through a combination of innovative architecture and advanced submicron process
technology. This family will allow us to enter new higher volume market segments.

Our third strategy is to continue the enhancement of our
software, which reduces prices for our customers by improving silicon utilization and
performance. We know that software is a key enabler in delivering the benefits of
programmable logic to a larger customer base. As a result. we acquired NeoCAD, Inc.
(NeoCAD), a developer of Field Programmable Gate Array (FPGA) design software. Given the
growing demand for higher-density FPGA products, we feel the combination of NeoCAD and
Xilinx will have a major impact on broadening our customer base by providing more
effective software for higher density devices. While software represents less than 5% of
our total revenue, we have always recognized how critical it is to the success of Xilinx.
We have stated emphatically that both software and integrated circuits need to be
developed concurrently within the Company. The crucial balance among device density,
performance, cost and delivery is intimately related to, and in most cases driven by, the
co-development of silicon and software.

We believe that our three strategies-lowering prices commensurate
with cost reductions; introducing new, innovative architectures; and developing more
powerful, easier-to-use software-will enable us to expand the programmable logic market
and further penetrate the gate array market.

Clearly, programmable logic trends are accelerating. Dramatic
increases in device densities and speeds, along with new process technologies, will occur
in the coming year. Our customers, such as the ones highlighted in this report, are
driving the demand for complex, programmable logic products. This is happening because
their product cycles are shrinking rapidly and end user markets are becoming more
competitive. Xilinx's research and development spending, which exceeds that of any other
pure play programmable logic supplier, is directed at meeting our customers' changing
needs.

To lead the Company in achieving our strategies, we welcomed Curt
Wozniak as President and Chief Operating Officer, effective August 1994. Mr. Wozniak spent
more than 10 years with Sun Microsystems in senior management positions overseeing
manufacturing, engineering and marketing. He brings to Xilinx the experience of managing
rapid growth and a relentless drive for superior bottom-line results.

As we enter fiscal 1996, Xilinx is well-positioned for continued
success. We intend to double the current number of product architectures during the coming
year. When combined with our enabling software, our customers can fully utilize the
attributes that the new architectures will offer. We will also continue to migrate many of
our existing product families to more advanced process technologies, which will result in
additional improvements in price and performance for our customers.

As we look back on the accomplishments of fiscal 1995, we
recognize that the outstanding efforts of our employees, coupled with the support we
received from our customers, distributors, strategic partners and shareholders, played an
instrumental role in our success. Thank you all for making fiscal 1995 a great year for
Xilinx.